Item 7a.   Quantitative and Qualitative Disclosures about Market Risk

We are exposed to various market risks, including commodity price risk, foreign currency risk and interest rate risk. To manage the volatility related to these risks, we have entered into various derivative contracts, the majority of which are settled in cash. Such settlements have not had a significant effect on our liquidity in the past, nor are they expected to be significant in the future. We do not use derivatives for speculative or trading purposes.

Commodity Price Risk

We manage a portion of our exposure to price risk related to natural gas purchased in the normal course of business by using forward physical contracts and hedging derivative financial instruments. The changes in the market value of these derivative instruments have a high correlation to changes in the spot price of natural gas. Gains and losses from the use of these instruments are deferred in accumulated other comprehensive income on the consolidated balance sheets and recognized into production costs in the same period as the underlying transaction. At December 31, 2006, accumulated other comprehensive income/loss includes $3.0 million in unrealized net-of-tax losses for the fair value of these instruments as compared to $7.5 million in net-of-tax gains at December 31, 2005. A sensitivity analysis indicates that the reduction in the fair value of these instruments at December 31, 2006, due to hypothetical declines of 10% and 25% in market prices of natural gas at that time would be $2.7 million and $6.6 million, respectively (December 31, 2005—$4.6 million and $11.3 million, respectively). Any resulting changes in fair value would be recorded as adjustments to other comprehensive income, net of tax. Because these instruments are accounted for as hedges, these hypothetical losses would be offset by the benefit of lower prices paid for the natural gas used in the normal production cycle.

Interest Rate Risk

Our outstanding debt is a combination of both fixed rate debt and variable rate debt. The variable rate portion of long-term debt is $600 million out of a total of $913 million. An increase of 1% in short term rates would decrease pretax income by $6.0 million or alternatively a decrease of 1% in interest rates would increase pretax income by $6.0 million. Our investment practice is to invest in highly liquid money market funds or securities with short remaining maturities. As a result, changes in interest rates are not expected to have a significant impact on the value of these investments. As such, future changes in interest rates will not have any impact on the value of cash equivalent investments however; changes in interest rates will impact interest expense due to variable rate debt within our debt structure. We do not engage in interest swaps to manage interest rate exposure.

Foreign Currency Risk

We are subject to the impact of changes in exchange rates on revenues and operating costs, firm commitments for capital expenditures and existing assets or liabilities (including certain inter-company balances), particularly changes in the value of the U.S. dollar versus the Canadian dollar. At December 31, 2006, there were no foreign exchange contracts outstanding.